Logo Guide to Business in Spain

2Financial institutions

2.8 Pension plans and funds

2.8.1 Features

The insufficiency of the Spanish social security system, and the threat of a potential crisis in the system, prompted the sentiment that social security benefits, especially retirement benefits, would have to be supplemented. Thus saving and funded pension plans emerged to ensure an adequate pension upon retirement. In 1987 the Pension Plan and Fund Law introduced in Spain a savings arrangement that has given rise to a solid long-term instrument through which investors can provide for the future. This Law resulted in the institutionalization of pension plans sponsored by employers, certain associations and financial institutions.

The savings are invested in a pension fund and are returned, capitalized, upon retirement, death, death of a spouse, orphanhood, permanent and absolute inability to work in the regular occupation or permanent and absolute inability to work, and complete disability or severe or complete dependency of the participant. This system is of great social import, since it ensures future income for the participant or beneficiary. Moreover, pension funds have high investment potential as they have to invest the funds they receive, which gives them great financial power.

The current legislation on pension plans and funds is contained in the Revised Pension Plan and Fund Law, approved by Legislative Royal Decree 1/2002, in Royal Decree 304/2004 approving the Pension Plan and Fund Regulations and in Royal Decree 62/2018.

A pension plan is a contract that regulates the obligations and rights of the parties to it (participants, sponsors and beneficiaries) with the aim of determining the benefits that the participant or the beneficiary is entitled to, the conditions of that entitlement and the manner in which the plan is financed. These plans are based on contributions of savings which, duly capitalized, ensure future pensions.

The various characteristics of pension plans include, most notably, their favorable tax treatment and the restrictions on being able to draw out any of the accumulated savings prior to the occurrence of the contingency covered, except in cases of long-term unemployment or serious illness. With the entry into force of the Royal Decree 62/2018, holders of any form of pension may be able to draw out the savings related to contributions made at least 10 years ago.

Pension plans, regardless of their type, must necessarily be included in a pension fund, which are asset pools without separate legal personality created for the sole purpose of complying with pension plans, and are the investment instrument for the savings. All financial contributions from the sponsors and from the plan participants must be immediately and necessarily included in the position account of the plan in the pension fund, out of which any benefits arising under the plan will be paid.

A pension fund has no legal personality and must be administered, necessarily, by a management company, which keeps its accounting records, selects its investments and orders the depositary to purchase and sell assets. The following may be management companies:

  • Corporations formed for this sole purpose and which have obtained the prior administrative authorization required.
  • Life insurance companies authorized to operate in Spain which have obtained the prior administrative authorization required in order to manage pension funds.

In order to set up a pension fund, prior authorization from the Ministry of Economic Affairs and Digital Transformation and registration of the corresponding public deed at the appropriate Commercial Registry are required.

With regard to the investments made by pension funds, the regulations currently in force have aimed to lend greater legal certainty to the investment process, with measures to encourage transparency in investment and the supply of information to participants.

In this respect, the applicable legislation has established a specific authorization procedure for entities wishing to engage in these activities.

2.8.2 Developments

At the end of 2022, the number of pension plans appearing in the DGS Register totaled 2,355, compared with 2,362 the year before18.

The assets managed by Pension Funds increased 9.7% thanks to the improvement in the significant corrections in market prices. At December 31, 2022, assets managed by Pension Funds amounted to 115,641 million euros.

The table below shows the changes in pension funds in Spain by number of registered pension funds and managed assets.

YearRegistered fundsAssets
(€ million)

The number of management companies entered at December 31, 2021 in the DGS Administrative Register totaled 67.

18The differences between the information given in previous and the present year are because of the constant revisions and actualizations of the data found in the registries of the DGS.